Friday, May 7, 2010

FINANCIAL AND ECONOMIC TERMS

payment date of a loan or other financial instrument, at which point the

principal (and all remaining interest) is due to be paid. In other words, the

maturity is the date the borrower must pay back the money he or she

borrowed through the issue of a bond.

Balloon Maturity:

A repayment schedule for a bond issue where a

large number of the bonds come due at a one time (normally at the final

maturity date).When a balloon maturity occurs, a company must pay the principal back to borrowers on many bonds at once. If the company is short on cash then it may have trouble making all the payments.

Yield curve:

In finance, the yield curve is the relation between the

interest rate (cost of borrowing) and the time to maturity of the debt for a

given borrower in a given currency.

Rolling:

In finance, trading out of a standard contract and

simultaneously into the contract with next longest maturity, so as to

maintain a constant maturity, is referred to as rolling a contract.

Liquidity:

In business, economics or investment, market liquidity is

an asset's ability to be sold without causing a significant movement in the

price and with minimum loss of value. Money, or cash on hand, is the most

liquid asset. An act of exchange of a less liquid asset with a more liquid

asset is called liquidation. Liquidity also refers both to a business' ability to

meet its payment obligations, in terms of possessing sufficient liquid

assets, and to such assets themselves.

Futures contract:

A futures contract is a standardized contract to buy

or sell a specified commodity of standardized quality at a certain date in

the future and at a market-determined price (the futures price). The

contracts are traded on a futures exchange. Futures contracts are not

"direct" securities like stocks, bonds, rights or warrants. They are still

securities, however, though they are a type of derivative contract.

Negative Verification: A system of confirming that a bank's records

agree with a customer's records. The bank contacts the customer to

provide specific information about the account. The customer is asked to

respond only if the information is incorrect; otherwise, it is assumed to be

correct.

Direct Tax vs. Indirect Tax:

a direct tax is one paid directly to the

government by the person on whom it is imposed (often accompanied by a

tax return filed by the taxpayer). Examples include some income taxes,

some corporate taxes, and transfer taxes such as estate (inheritance) tax

and gift tax. In this sense, a direct tax is contrasted with an indirect tax or